Hey guys! This is Wan Wei, and I’m so excited to be making my first post on Steemit today and learning from wise people here!
Yesterday, IMF’s head Christine Lagarde compared the future of cryptocurrency with the internet. Inspired by her words, I want to articulate some personal thoughts by clarifying the definitions of “currency”, “money” and “exchange” today. In this post, I posit that the blockchain technology has radically changed the way we may view trade– barter trade is not only back, it is bigger and stronger than before.
This change in perception naturally has immense implications in terms of how we want to do public relations when it comes to ICO.
Defining “Currency”, “Money” and “Exchange”
According to Investopedia, a currency is a generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy. Used as a medium of exchange for goods and services, currency is the basis for trade.
Now, how about the term “money”?
Investopedia defines money as an officially-issued legal tender generally consisting of notes and coin, and is the circulating medium of exchange as defined by a government. Money is often synonymous with cash and includes various negotiable instruments such as checks. Each country has its own money that is used as a medium of exchange within that country.
Last but not least, let’s define the term “exchange”. According to the law of absolute and comparative advantage, two individuals engage in exchangeif and only if they perceive themselves as being better off after exchanging goods and/or services with each other.
So, Is Cryptocurrency A “Currency”?
Now, given the above definition of a currency, that is– “a generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy”– we can safely say that cryptocurrency is not legal tender.
This is because cryptocurrency is not issued by the government, or regulated by the central bank.
So why do people tend to associate “cryptocurrency” as a currency?
I guess the naming of this asset started rather innocently. For instance, from the branding perspective–whenever you first create a relatively new concept, it is always efficient to “hack” into the minds of the public by associating the new with something familiar.
This is known as “brand hijacking”.
One example in Singapore is the dating app “Paktor”–when the Singaporean startup first launched this app, they positioned it as “The Tinder of Asia”. Everyone knows Tinder, and potential customers in Asia will feel a sense of familiarity and think immediately of the Paktor brand when they want to find a hook-up.
However, is Paktor associated with the Tinder brand just because they say they are the Tinder of Asia? The answer is a resolute “No.”
The same happens with the term “cryptocurrency”. Even though there is a word “currency” in “cryptocurrency”, cryptocurrency is not a currency from the economic perspective. We also have to note that it is not a legal tender by definition.
Conceptualizing Platforms Of Cryptocurrency Exchange
Now here comes the more important question. If cryptocurrency is not a currency and instead a digital product, then how can we apply the concept of forex to conceptualize the exchange of it?
A forex exchange (platform) is defined as “Foreign exchange is the exchange of one currency for another or the conversion of one currency into another currency.” Forex markets can be regulated or manipulated by governments or the central bank, because the central bank has the ability to control money supply, while governments have the ability to control money demand via trade policies.
Therefore, precisely because cryptocurrency is not a currency, it is only technically correct to use the concept of “barter trade” to conceptualize the exchange of cryptocurrency. That is to say, if I trade bitcoin with CoinXYZ, the trade is actually a “barter” instead of a “forex trade”.
“But Wait A Minute…Isn’t Barter Trade The Most Regressive Form Of Trade?”
My answer is YES, it used to be the most regressive, primitive form of trade–UNTIL the advancement of blockchain technology.
My friends, are you not excited? We are standing at the border of a brand new era witnessing the great Blockchain revolution happening right in front of our eyes.
Let me explain barter trade to you, so that you can understand better.
Barter trade is like this: In the past before money came about, a farmer who rears cows but want to eat fish will have to find a fisherman to exchange his cows for. So they will negotiate terms of exchange–for instance, to exchange 1kg of beef for 1kg of fish.
However, what if the said fisherman is a buddhist and swears off beef but wants chicken? Then the farmer is stuck, isn’t he? In that case, barter trade cannot happen, and the farmer has to either give up his will to eat fish or to made an intermediary trade with another farmer (for chicken), and then approach the fisherman with chicken for fish. Then another round of negotiation has to take place.
This used to be why barter trade is regressive–it is terribly inefficient. However, with blockchain today, barter trade has not only become moreefficient because of its speed. it has also made the world smaller. Because anything is now possible with a mobile phone and internet connection.
Does this not excite you? 🙂 Blockchain will draw the world closer, and strengthen various business relationships by the nature of its transparency.
Back To The Future With Barter Trade
So are we all regressing with barter trade?
The answer is a definitive no. Because technology and the internet has allowed us to efficiently polarize, organize and define ourselves.
We can now choose to work with the people we want to work with, transact with the people we want to transact with, and spend our time and resources more efficiently. We have never enjoyed more freedom and space as compared to previous eras.
What a huge liberator blockchain technology is! I’m reminded here of “Engineering Public Consent”–an essay by the Father of PR Edward Bernays. The fundamentals of Economics is all about the dynamics of demand and supply, and guess what– we are back to fundamentals again, sans the fluff and complication.
And I’ll be more than willing and happy to engineer your consent with cryptocurrency matters in the near future. (:
I’m excited. Please join me in this amazing journey ahead!